Through no fault of their own, 30 million Americans were laid off from their jobs and left with little to no choice but to go on unemployment. Many may soon face eviction, hunger, bankruptcy.
We all know the biggest harm caused by the COVID-19 outbreak was to public health. But the economic impact was also dramatic and will likely be felt for years to come. Layoffs, small business closures and the physical and mental cost of isolation have done untold damage to our families and communities.
It’s natural and understandable to want to offer support personally or through government resources to people who are struggling during this time — after all, our programs are called “the safety net” for a reason. They exist to serve the truly needy and catch them when they fall.
I disagree, however, with a recent Washington Post column that conflated government programs with a solution to the financial plight facing millions across the country. And I even more strongly disagree with the conclusion made in the column that excessive unemployment benefits – well beyond the paychecks the recipients received in their original jobs – are a good idea for anyone.
When Congress passed the CARES Act, they implemented a $600-per-week boost to unemployment insurance (UI) — a dramatic expansion from the $25 bonus during the Great Recession in 2009. The intent was to offer some additional cushion to state benefits. With a flat rate of $600 no matter who you were or where you lived, 68 percent of people receiving unemployment benefits were paid significantly more to stay at home than they could make returning to work. The average benefit for unemployment was now nearly $1,000 per week, or the equivalent of about $50,000 annually. In smaller towns with median incomes hovering around $30,000, that’s a serious influx of cash — a bigger impact than was felt in more cosmopolitan areas.
The Washington Post column characterized finding a problem with this UI boost as calling desperate families “welfare queens.” That’s a purposefully misleading and uncharitable way of discussing a very real issue facing families and small business owners.
The best way to ensure that resources are available to those who truly need them is to crack down on fraud and help those who can work get back to their jobs. It’s an indisputable fact that the massive influx of cash into our states’ unemployment programs has led to unprecedented levels of waste, fraud and abuse. The United States Department of Labor estimated the potential for as much improper spending in 2020 as total spending in 2019, and a number of states have experienced significant spikes in fraud, resulting in millions of dollars taken out of trusts meant to fund benefits for the truly needed. It had gotten so bad that a scammer was even able to use Arkansas Gov. Asa Hutchinson’s name to fraudulently file for unemployment — and get approved.
One of the issues that led to the bonus not being extended after July 31 is a rise in work refusals — people being offered their job back and then refusing to take it so they can continue to receive benefits. Another word for that is fraud. In the world of academics, you can measure small, unrepresentative samplings of the labor force, or even create all sorts of models to theoretically test human behavior. However, in the real world, business owners who were fortunate enough to weather the lockdowns now find themselves competing with the government for their employees. A recent report found that 65 percent of small business owners were worried their employees wouldn’t return to work. In some cases, that includes employees who were previously quite happy to hold that same job.
It’s now been a month since the CARES Act UI boost expired. In that time, manufacturing has grown, unemployment claims have dropped by as much as 70 percent in some states and nearly two million people left the unemployment program. Our economy is improving, and now is the time to help people return to work. Continuing to flood UI with cash will only further jeopardize our small businesses — and risk workers not having a job to come back to at all. Any short-term financial support would be met with long-term catastrophe. Congress should resist any temptation to revive a boost in unemployment benefits.
Joe Horvath is a senior fellow at the Foundation for Government Accountability.